Reverse 1031 Tax Deferred Exchange

Reverse 1031 Tax Deferred Exchange

The EAT can take title of either the new property or the relinquished property. It is imperative that the investor arranges the 1031 reverse exchange with the EAT prior to the replacement property closing or the IRS will disallow the tax deferred exchange.

First, your beneficiaries that receive your tax-deferred accounts will be subject to making at least RMDs for their remaining life expectancy at your death. Those RMDs or any more money withdrawn each year will be taxed at your beneficiary’s highest tax bracket rate since he’ll probably have a working income too. So, if you use much or all of your tax-deferred funds before you die, then you’re leaving less tax liability for him since your remaining taxable accounts (with their tax basis and lower taxation rates) hold less tax liability to him.

Exit Strategy: The lifecycle of a real estate investor tends to evolve to the point that one day; the investor would like to slow down, cash out, or retire. Whether the investor owns rental houses, warehouses, land, office buildings, or apartment complexes, a potential replacement property could be a well-located, residential property in a resort community in an attractive setting – such as a beach resort or mountain property.


A common concern many people have regarding fixed income annuities is in regards to their tax treatment. The concept behind fixed income annuities is actually quite simple. A fixed annuity is simply an insurance product which pays out a fixed income over a specified period of time. This payment is determined at the time of the contract and typically does not vary.

So I was in the drug store the other day, trying to get a cold medication. You ever try and pick one of these out? It’s not easy. It’s a wall. It’s an entire wall of cold medication, you stand there, you’re going, “Alright, alright, alright, okay, what the hell? This is quick acting, but this is long lasting. When do I need to feel good, now or later?” It’s a tough question. – Comedian Jerry Seinfeld

As you approach your golden years, you may be wondering about the various pros and cons of tax deferred savings plans. While the idea of not paying taxes on your savings may seem alluring, there are also fees to consider. Another complication is determining which tax deferred savings plans your family is eligible for. Before making a decision, you should carefully examine all options to determine what kind of saver you are.

So how did this all come about – what is the history of the tax-deferred exchange?
The tax-deferred exchange actually has a rather long and complicated history dating back to 1921. The first income tax code was adopted in 1918 as part of The Revenue Act of 1918, but it did not provide for any type of tax-deferred exchange. The first tax-deferred exchange was authorized as part of The Revenue Act of 1921 when the United States Congress created Section 2021 of the Internal Revenue Code. Between 1921 and 1970, exchanges were always simultaneous swaps between two parties, by the way.

Annuity tax deferral is only one of the advantages offered by annuities. With annuities, investors can elect to receive a life-long, guaranteed income stream. Plus, an annuity can have a death-benefit feature where the holder can designate a beneficiary. The annuity death benefit is exempt from probate since it is considered life insurance.

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